Craigslist Canada is under pressure from the Royal Canadian Mounted Police to take down the erotic section of their Web site following a decision by the U.S. site to remove that section earlier this month. So far they have resisted and it will be interesting to see how that plays out. Many other countries allow the market for sex to take place online and, putting all other considerations aside, for those of us who make our living out of understanding how markets work the online sex trade provides a goldmine of largely untapped data. The best sites for this purpose are those that allow the men who use prostitutes to rate their prostitute experience online for the benefit of other potential buyers. Apart from the general weirdness as to why someone would want to do this, these sites give us remarkable detail about a market that is otherwise difficult to measure but important to understand.
The scope of these sites is massive. One site in the Netherlands, for example, claims to have 25,000 unique users daily and has reviews of over 20,000 service providers (i.e. hookers). In many of these sites the reviewers report the area in which the act took place (including addresses where relevant), the date and time, the time spent, the price and the act performed. They also provide a physical description of the worker, her place and provide colourful comments. While the data is only from one side of the market and, despite the fact that "reporters" are probably not typical, there is enough information here to start to answer some interesting questions about the sex trades.
One question economists have asked is: Why do sex trade workers make so much more money than other women doing jobs at the same skill level (i.e. no skill)? We call this difference in earnings the wage premia to prostitution. There are some theoretical possibilities as to why sex trade workers are paid more. They risk incarceration, violence and disease in their jobs and, as a result, are being paid a risk premia. Their earnings drop off as they get older, so perhaps they are compensated for taking up a career with a short life span, somewhat like professional athletes. They work in a profession that is heavily stigmatized and perhaps they are compensated for that as well. While we can theorize though, we can’t back up these theories without data. Perhaps this is where these rating sites might prove useful.Researchers in the UK have already taken a stab at this using data from a site in their country and developing a price model for sex work that exploits variations in prices over different regions of the UK.* They find that prostitutes in the UK earn double the weekly earning of a typical non-manual worker (who earns on average £327 per week) and more than three times that of manual worker (£220 per week). The most interesting result though is that prices are highest in areas where non-prostitution employment earnings were also high: London and the South East. This tells us that in equilibrium the price in this market is positively correlated with wage paid to other forms of employment. It is small step towards understanding the wage premia to prostitution, but it is a step in the right direction.
What someone really needs to do is purposely set up one of these rating sites to collect data that can be used to directly address our academic questions. I thought about this the other day when we were talking about an economic index for sex. The problem is that it would be expensive and who would fund a project like that? I suggest not an American granting agency. Maybe one in the Netherlands would be interested though, or Finland. I hear the Finns are very liberal minded when it comes to sex.
* Moffat, Peter and Simon Peters (2004). “Pricing personal services: An Empirical Study of Earnings in the UK Prostitution Industry.” Scottish Journal of Political Economy, Vol. 51(5)